Financial crisis hits Russian regions: Ukrainian intelligence reveals worst-hit areas

Sanctions, the loss of foreign markets and worsening global conditions have exposed the structural weakness of Russia's regional budgets, which are no longer able to meet basic obligations.

Source: Foreign Intelligence Service of Ukraine

Details: The situation is most severe in traditionally depressed regions, including the Republic of Kalmykia and Pskov Oblast.

Quote: "Their survival model has been built for decades on federal transfers, but now these flows are shrinking and access to credit is rapidly tightening.

Chronic debt, lack of investor interest and reduced subsidies are creating the conditions for a full-scale budget crisis."

Details: Coal-producing areas, such as Kemerovo Oblast, are expected to be among the main budgetary burdens for Russia this year. Falling global coal prices, sanctions and the complete loss of the European market are projected to reduce the gross regional domestic product by 4.1% and create a budget deficit of around 44 billion roubles (around US$558.7 million).

Quote: "The Republic of Khakassia faces a similar situation: unprofitable mines combined with dependence on non-ferrous metal prices and limited hydroelectric potential, where state-owned RusHydro [hydroelectricity company] is squeezed between tariff regulations and metallurgical lobbying."

Details: Metallurgical regions are also losing support. Falling aluminium and coal prices in Irkutsk Oblast are expected to result in a budget deficit of 40 billion roubles (around US$507.9 million).

"Some regions pose specific risks to the federal budget."

Astrakhan Oblast is expected to see its regional product fall by 2.1%, with negative trends likely to continue until 2028 due to depleted oil and gas fields and a lack of resources to develop new ones," the Foreign Intelligence Service said. They also noted that Kursk and Belgorod oblasts have effectively become frontline regions, fully reliant on subsidies.

Background: Water tariffs have been doubled in Russia-occupied Ukrainian cities despite ongoing disruptions to water and heating supply. Two-tier increases in utility payments have also been reported within Russia itself.

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